The Wall Street Journal

A former World War II bomber hangar houses a monument to the recent plunge in oil prices: hundreds of bags of shredded plastic.

The hangar is used by CK Group, a recycler of bottles, pipes and sundry bits of plastic. Plastic is often derived from oil, and there used to be money in recycled scrap. Not anymore. The fall in oil prices has dragged down the price of virgin plastic, erasing the recyclers’ advantage.

“Many in the recycling industry are hanging by the skin of their teeth,” says Chris Collier,CK’s commercial director, walking among the bales of unsold shreds. “Everybody is desperately chasing for money to stay alive.”

The ramifications are being felt far and wide. In the U.S., many cities and towns pick up detergent bottles, milk jugs and other bits of household plastic and sell them to recyclers who sort, process and resell the scrap. These municipalities typically earned cash—as much as $10 a ton in parts of New Jersey—for selling recyclable materials under contracts that tie the sales price to commodities prices, with a minimum.

In recent months, some expiring contracts have been replaced with new contracts that set no such floor. That raises the possibility for some municipalities that a moneymaker could turn into a loser.

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